All posts tagged credit conditions

U.K. consumers are finding the recession hit economy a tough road to travel, and the comprehensive third and final release of first quarter gross domestic product data confirm just how bad the first three months of the year were for Britons.

Not only did household expenditure fall 0.1% compared with the fourth quarter of 2011 when spending rose 0.5%, but the savings ratio fell to 6.4% from 6.9% in the fourth quarter of last year. That shows that despite the largest drop in spending between quarters for a year, the ability to save still diminished.

“Real household disposable incomes dropped at a quarter-on-quarter rate of 0.9% as inflation continues to outpace wage increases,” said Rob Harbron, economist for the Centre for Economics and Business Research. “With consumers accounting for roughly 60% of expenditure in the UK economy, subdued household spending continues to weigh on growth prospects,” he added.

While inflation is easing more quickly than expected, and retail sales data for May and June according to the Office for National Statistics and the Confederation of British Industry have been more upbeat, other measures are less sanguine.

The Bank of England’s latest survey on credit conditions in the U.K. reported that mortgage costs rose in the second quarter of the year and are expected to rise further in the third.

“The key message is that while availability was broadly unchanged, and expected to remain so in the next quarter, elevated bank funding costs continue to be passed on to customers,” said Muro Giorgio Marrano, economist at UniCredit Research.